Shamubeel, aged 32, is a passionate economist interested in the workings of the New Zealand economy. He is a young thought leader unafraid to take a contrarian view. He is Principal Economist at the New Zealand Institute of Economic Research (NZIER). He shared his perspective on the Generation Y perspectives of corporate governance.

What is the role of a board from your perspective?

A board creates long term value for shareholders. The board begins with a vision of where the firm wants to be in the long term and sets a strategic course to get there. They are the custodians and navigators of a firm. Boards also set the boundaries within which a firm’s management operates. Critically, boards have to take a holistic approach, not just focusing on short term profits, but long term value creation that is also sustainable from environmental and societal perspectives.

Looking forward 5 years, how do you think the board dynamic will change?

The role and goals of a board will remain the same: to maximize shareholder value in a responsible manner. The dynamics of boards will change, building on significant change already experienced in recent years. Boards will become more professional and diverse.

The past five years have led to significant change. The failure of high profile companies such as finance companies and Mainzeal, the prosecution of directors and tightening of regulation mean there is a greater spotlight on boards. Directors must be diligent, qualified and professional. There is a perception that boards are an old-boys-network and a gentleman’s retirement.

Regulators and politicians will place even greater scrutiny on boards. There is increasing participation in equities through KiwiSaver and upcoming partial floats of state owned assets. The penetration of equity holdings amongst New Zealanders will probably be the highest since the stock market crash of 1987. Many of these investors are novices and we cannot have a repeat of lost market confidence. This will make regulators and prosecutors even more focused on the quality and conduct of boards and their directors.

There is a concerted push for greater diversity on boards. Evidence shows diversity leads to better decision making, as long as the pre-requisite skills are also present. Many incumbents are uncomfortable talking about diversity. But change must happen. Diversity has to be broader than just gender; it must also encompass age and ethnicity. Boards should represent the required skills for a successful board, as well as a real appreciation and representation of society.

How will the next generation of board members differ and operate?

The next generation of board members will be younger, more professional and will better reflect New Zealand society. They will complement the skills of more experienced board members. Their mode of operation will make much greater use of technology, embrace diversity and be more outwardly focused.

How are we preparing the next generation of board member for the future?

There is a strong push by the director community to encourage, train and employ younger directors. Initiatives such as future boards, discounts to IOD membership for under-40s and a much more outward focus by the apex organization, the IOD, through media, online and social media shows a commitment to engage with the next generation of directions in their work and playgrounds.

What would give Gen-Y the most sense of achievement on a board?

It is human to crave success, validation and consolation when something goes wrong. Gen Y is no different, although there is a perception that they need coddling. As someone who could fall in the Gen Y category, but only if are being generous, I would suggest this perception would apply to youth of all generations.

For Gen Y, the world is faster – much faster than was possible only a decade ago. The rise of the internet to a ubiquitous and helpful necessity, and related technologies like smartphones and social media, has transformed the world of possibilities. It is possible to become a multimillionaire before you are allowed to buy a drink legally – witness Yahoo’s purchase of Summly from 15-year-old Nick D’Aloisio for US$30 million. Gen Y are digital natives, where nation-state boundaries are porous. They do not see gender and race as an issue. They are global citizens who need a broad and inclusive focus, but still have a strong sense of community. Gen Y, like generations before them, will gain the most sense of achievement if their skills and outlook are used to make better firms.

Final Word or comment on corporate governance in New Zealand from a Gen-Y perspective?

Good governance is at the heart of good business, a successful community and economy. Gen Y have skills that will complement experience of our current boards.

Are current boards ready to succeed in this world without true diversity and professionalism?

Change is faster than any time in history, it heralds a new phase of industrialisation. Industrialisation was about better ways of doing old things. The New Industrialisation is about creating products for the customer. There is scope for greater customisation and thus specialisation and fragmentation of markets. New innovations like 3D-printing, genome-based medicines and customers who want greater customisation are a threat to traditional supply chains and an opportunity for creative and nimble types.